Partner at Foundation Capital, Sid Trivedi explains how he sees startups making B2B sales in the enterprise sectors. We also discussed hiring commission-only salesman and full time account executives. If you are an early stage startup in B2B field this episode is right for you.
Sid Trivedi's article on Cybersecurity being the next trillion dollar market: https://www.linkedin.com/pulse/cybersecurity-next-trillion-dollar-market-siddhant-sid-trivedi/
Sid Trivedi's article on Cybersecurity during pandemic: https://www.linkedin.com/pulse/stay-home-secure-productive-security-pandemic-sid-trivedi/
Foundation Capital: https://foundationcapital.com/
For those who want to see ideas turning into fundable companies - Student Startup Battle: https://www.eventbrite.com/e/student-startup-battle-tickets-105973058270?aff=ebdssbonlinesearch
This is fun reason redo. And today's a guest speaker we have C partner at Foundation Capital. And in this episode we'll talk about business to business customer acquisition. How that changed?
What tools would Sid recommend to use and stuff like that? So, since Leslie called by giving us some background on yourself and on Foundation Capital sure. Well, constantly.
And thank you so much for having me on your podcast. Let's start with a quick background on me, as you mentioned.
My name is and one of the partners that foundation capital, you know, I've been in I've been broadly focused on the enterprise software space now for eight years and investing in it for the last six years.
You know, I've had this unique background of having looked at companies of many different cycles. So, in my early days, I focused on invest in banking.
I Barclays in New York as it was going through its transition from becoming legal from becoming from Lehman Brothers to Barclays.
And while there,
I focused on enterprise software and emanates and I was very lucky to be at Barclays of a time when we were involved in some phenomenal transactions like the of a service.
Now, there's a lot of exciting things going on post that I moved it. To private equity, and they are really focused on investing in enterprise software companies.
And then a little bit about Foundation, which was your second question, the early stage venture firm, based out here in the Bay area, with two offices, one in Palo Alto, and one in San Francisco. Obviously that need for an office.
Right now, is it's not as relevant as it was a couple of months back, but we're hoping that we will we'll have those offices open soon and, you know, we've been around for twenty five years.
So, we founded in nineteen ninety five, and we are really a very early stage investors. So when we invest in a startup, we're either the first or the second institutional investor.
And usually, when I or some of my partners get involved, the startup has somewhere between two people to thirty to forty people. That's when we come in.
And when we come in, we usually lead an investment usually take between twenty to thirty percent ownership. And we usually take a board seat, and we're active investors in helping our founders scale that businesses in many different ways.
And in terms of where we invest, we invest across for big categories enterprise software. I spent most of my time fintech consumer and what we call frontier tab, which is things like space really?
Printing robotics, deep learning chips, all the other areas that don't I that are not related to the first three candidates got it. That's pretty cool that you're doing. The lead investments that's really awesome.
And the fact that you're doing the early is great. So.
I was gonna ask you a bunch of questions, but while you were doing this initial question answers here you answer a lot of them. So let's jump straight into this first question will be about cyber security. So what's going on with that field right now?
Does it get affected by the current wait? And what do you see going on in terms of fundraising? For
founders? Yeah. So it's a fantastic question. So, maybe I'll talk about cyber security broadly and then I'll talk about corona virus as well.
Sounds good. So first thing on cyber security broadly, but the category of the last decade has just grown exponentially, and I'm sure, you know, I know that you don't focus on cyber security, but I'm sure you're aware of creatures.
I'm sure most recently, you saw them very, you know,
reported Twitter breach that happens these are not one off incidents anymore, whether it's Twitter or Capital one or equal fax or some other organization, you know,
each of these organizations are being breach and to be honest,
it's not so much a,
get you moment most of these organizations they know that they will be breach.
It's just a question of when so that has ended up, resulting in a creation of a category has become very, very big, the category has been around for thirty years but in the last ten years, it has really expanded.
Today. There are twenty six public cyber security companies in the United States, but it's the largest single category.
Of enterprise software, so that is, you know, it's very, very exciting to see these types of companies. That may include very large companies like Palo Alto Networks CrowdStrike,
which are worth over twenty million in market cap,
and also smaller market cap companies,
to spend a lot of fun to kind of go and see the growth in this category.
And, you know, in twenty, nineteen, those about two hundred and fifty billion dollars of total spent, and the Cyprus could be enterprise, cyber security market businesses. So it's a very, very big category.
And, as a result of that is created thousands of new startups. Like, I'm hoping to become one of those public companies in the future. So it's a very interesting category to be in because there's a lot of things happening and this constant innovation.
You're constantly being attacked by hackers. They're constantly innovating. And you're constantly trying to figure out how do a dog,
the bullets and how do you find those bullets before they're right in terms of how pubid has impacted cyber security the overall it's been a positive impact in that,
the market has not fallen short for sure broad spent in all categories,
but not within enterprise software has declined.
And but it has not declined in terms of decrease, total decrease since in budget. It is just declined in terms of its increase in budget.
You know, where we work, or where we have worked before photos of ourselves online was just not normal.
You know, you and I, if you ask somebody on the street, the two thousand and two, would they go and share information on LinkedIn about their background?
Anyone could access they would've said, no, this is a terrible idea and that and because we are more open to sharing our personal information.
It's becoming very important for these organizations to secure personal information and that's why cyber security has this opportunity. Really expect right?
The reason for that trillion dollar market assumption, is it twenty seventeen, which is the latest, the latest data we have the global physical Army's budget that is for armies globally in the world was about one point seven trillion dollars.
A global physical army, us, army, armies and other countries.
If we assume that our world is moving to the, you know, to the digital realm and our assets are also moving into that digital realm. And obviously we're all feeling this right now stuck at home most of activities on the computer.
And we should also assume that the same way that be protect our physical footprint. We're also going to protect the digital footprint, the assumption around the trillion dollar market. That's really cool. That's a nice assumption.
I hope that so that, you know, one point, seven trillion budget will migrate to something that makes sense, but will not get into that topic because it's just not fundraising. Really? So, let's talk about something fundraising related.
First of all. I'll leave the links to your articles in the description of this episode so please check it out and second. Let's talk about those early stage founders in the field. This in the fields that you're investing.
How let's talk about the customer acquisition for those enterprise companies. What's your major advice to those people who are just begin?
You know, they have some sort of demo they have some sort of working prototype how can they start acquiring customers, or at least gain letters of intent? Yes, it's a great question.
So, there's a couple of things that have happened obviously, my advice would have been very different
at the beginning of this year. You know, there are things that have changed the things that haven't changed, but that things that have changed, the biggest change we've had is that it's very hard to be people in person.
You know, when some of the things that I and my partners do and other firms to as well as we, but a pretty active role, and making sure that we're out there. So that any founder can go and reach out to us.
That is usually, you know, in a normal day would be for us to be an event for us to be a conferences that people can beat us. And for us to be available that has obviously all moved to the digital.
And in that world, it is becoming increasingly likely.
That most of the deals that myself and my partners will see from our networks. You know, you might send me something. That's interesting. You and I know each other. That's an easy way for me to go and see an interesting opportunity. But now, what about the founders?
Who, I don't know and none of my people in my network no, how do they reach out to me?
And particularly, how do they do that in an environment where we're all stuck and hope there's no way for them to physically see me at a conference.
So, the advice that I would say to founders is to go and spend some time looking at the people that you're interested in talking to investors, you're interested in talking to. I'm figuring out a way to reach out to that.
I will tell you that I respond much more actively to LinkedIn emails I have in the past, but even more. So, right now, the same applies to cold emails.
I think if you send an interesting email around what you're trying to do, what your objective is, why you want to reach out to me and what your building and I, you know, I make it a point to, at least respond. And that response will either be.
I'm interested these, you know, let's set up a time or this isn't something that's relevant to our organization. This is why.
And instead that focusing on innovation,
some type of side hustle some type of site strategy around the company,
or idea that and I would absolutely say that take that follow type that available time that you have as a result of staying at home and use it effectively learn a new skill talk to friends.
Maybe you'll come up with an idea together and that will, cause you to go build something great. I will note that the market became a little bit too saturated.
I think, like, literally every second person who was in college, and maybe they want to take the semester out because they want to spend, like, tens of thousands of dollars, you know, sitting just say in front of the computer just like we do right now.
And tons. And tons of them are doing are becoming entrepreneurs. So, have fun there. You know, but, let's talk about customer acquisition. So not investor acquisition, which was great advice, but customer acquisition.
So, those companies, they became more protective of their budget. We all have to clear our expenses
and so on, and so forth.
How should founders, how should those early stage founders reach out to those potential customers and make sure that they're the ones who knows from the crowd of hundreds of other entrepreneurs reaching out to the same exact customer? Yeah, it's a great question.
So I think two things.
One, you know, you should have the necessary marketing and technical materials, ready in advance of reaching out to customers.
So, with it's a customer pitch deck, or a white paper, have some level of information that, that you can actually present to customers going test it out a couple of times.
If you have an investor use that as a medium to do that,
if you have friends,
obviously tested out internally within the company before you go and speak to customers, you know,
and then when you go through those presentations with customers,
hopefully you will be more in explaining your value proposition in these calls,
you should spend some amount of time.
I usually say to a fifteen minute customer pitch, you usually will get about thirty minutes with the customer. Fifteen minute customer pitch five minutes. Really?
Telling them about your background, why y'all uniquely suited but then ten minutes really understanding what the customers goals are.
How is the infrastructure built out? What are the security or it? Priorities? How have they changed because of the corporate, nineteen, and then making the shelter place enforcement.
And in that period of time, trying to understand, is this a customer that is a near term opportunity, a medium term opportunity, a long term opportunity, or no opportunity.
And if they're near term opportunity, then you want to be active, want to set up a followup call. You want to be able to highlight why you're meeting that top one, two or three priority. If they're not then, you know, fallback move onto the next customer.
And the next meeting, this is not the time to go and push customers to doing something that they don't want to be involved in. You know, there's never good time to do that. But this is particularly not a good time. They are Pre, occupied with a lot of different things going on.
Shelton place is not made it easy for any business stock rate.
That's true. That's true. Good advice. And question is how much can it cost to acquire? That was enterprise companies. I know the price. They're a huge lead acquisition.
I've checked in before this call and it's just insane. It's thirty one thousand dollars. Sometimes it goes way up to five to six thousand per leads, which is insane. I cannot imagine how that works, to be
And do you think that someone so I know this tool called hunters dot, which is pretty interesting model but there it starts with one thousand per leads.
Would you recommend founders trying to use those tools or should they tried to actually reach out to people on LinkedIn? And try to get cheaper way, but that might take longer. Yeah.
So I think you have to try multiple different things. One is inbound and the way that you build an inbound strategies. You come up with a marketing plan.
If you raise capital or something significant has happened in your company and maybe you can go in. Yeah. An article in the press. That might help you.
if you have a new product that you've launch,
maybe you can go and create a blog and push that out multiple different social,
social media manners and,
maybe you can have a much better website that goes and explains a lot of things.
And use, you know, potential advertising to be able to go create inbound trust.
Obviously, that's not possible right now. Field sales rep. is an inside sales. Rep. right now inside sales rep. is to do web conferences and calls to try to go and get customer meetings.
usually you would have those two product strategy,
and if you have selling a product that's over six figures,
you will usually need a field sales team,
which is a team that spends a lot of time with the customer explaining the value proposition explaining the implementation period going through a process and ultimately,
resulting appeal a purchase order for the more midmarket and related products, you know,
the five figure range,
you usually need inside sales reps.
we'll be doing the calls and trying to get customers relatively quickly and those sales cycles up quick. There are weeks the field cells. Sales cycles can be months, six months, eight months at a time.
So the potential cost to acquire those customers is very high.
But if things work out, if you have a blue chip, the Fortune five hundred customer, and they start off as an initial small six figure deal over time, they can grow to a seven figure deal eight figure deal and potentially more.
So that's the opportunity. And you're absolutely right. The cost of acquiring customers is always high, and it's particularly high in the early days. It becomes better because over time you've become more efficient.
Categorizing what is a valuable customer potential customer this is not a valuable potential customer those questions those questions that you would ask to understand the customer's interesting or not. You become very clear. Right?
I like how you say, you know, small deals. We started with small deals. You know, six figures, just six figures, so small, but let's talk about the hiring process. So you mentioned hiring the sales?
Rep, that's a very frequent question that, like, one of the major questions there is can't hire someone purely for.
Commission based, so no base salary. So the startup is not funded yet. Their, all their financials go towards supporting the existing tax. So, being for service say a W.
S, and stuff like that, and they just don't have to money to be to risk, you know, paying a base salary to sales representative. Do you think it's possible to hire someone for pure really?
Commission based, so I don't I don't think you can hire a quota carrying sales. Rep. purely commission based. Who's gonna be extremely successful. I think you can hire what's called an SDR.
And then sorry, you're gonna ask something that I was gonna ask what says so is usually the rep, who makes all these cold calls and his, or her job is to get a meeting scheduled.
It's the call to explain the proposition not the thirty minute pitch. They usually will do the five minute call.
And hopefully get a customer excited enough to say, okay, fine, I'll take a meeting.
And then you get a quarter carrying rep with the SDR that subsequent meeting and the carrying rep's job is to do a thirty minute meeting and to really convince the customer that this is interesting enough for them to have a much longer deep dive to go.
And trial the product, and to get many more people from the organization involved.
So, could you get an for just a commission base? Absolutely. And then lots of organizations, which will give you from a consulting higher hiring perspective, you know, an organization. So they will do cold calls for you.
The extremely successful account executives. The quarter carrier reps will require a big salary. They will require commission based bonus.
And they do usually also want some type of equity in the company and, you know, that in that case.
The, the thing that you're looking for is somebody who has sold early on in a company stage they're used to a playbook, not being clear sales playbook, not being clear they use and not knowing exactly what a customer looks like.
And they will be creative enough to figure that out.
Those are the types of rep you want in the early days at the company scales when it's a mid stage or late stage, then your goal is different. You want the reps to upgrade process driven.
Who can follow that salespeople? Well, not gonna go ahead and move things around too much. I don't really execute on that label. Right. Sounds pretty complicated. To be honest.
And one thing that I wanted to pull up here on is you mentioned that there are organizations that will give you those for hiring process. I didn't quite catch that.
Yes, so you can hire a consulting firm based consulting firms and their job is to go. And and hire out a portion of their army, go and sell your product.
And what they do is they have a call sheet of enterprises leaders, a different enterprises, and they call those leaders and they will sell. They'll pitch whatever product.
That is, you can effectively think of it as a call center a difference that they're not going after individual consumers going off to enterprises the same way that you get. Some of those calls on your mobile phone selling you some products. I'm insurance product.
The enterprises get an equivalent type of call and both can do either calls or they can do emails as well.
Nice and what's what's the price range for those sort of call centers and call them that way? So, like, how much can it founder expect to pay for that type of service? So it depends on the engagement.
A lot of it is very project based you usually work with these with these consulting based organizations to figure out how much of time they should be dedicating.
How many people on their end I'm gonna make how many calls or emails you know, how complex is the product for them to explain.
And the price can be as little as a couple of thousand dollars as much as fifty, sixty, seven hundred thousand dollars, depending on how many calls you're making and maybe more too. But usually it's more than that.
Then you're gonna have people in house who will do the work for you? We'll full time. Nice. B, two B sales and enterprise are scared as H***. I mean, star ranges from a couple thousand dollars. Most founders barely have like a thousand dollar budget.
So be careful with other people, but we're moving onto the last couple of questions. First question, Yuri, kind of gave some advice to those early stage founders, in terms of reaching out to investors gain in the first context.
But is there something else that you can recommend those early stage founders who are just sitting at home right now and thinking I should raise mine now what should I do? Yeah.
So I think the big thing is try to build product early go and find,
who are the people you want to build that product with hey,
I think it's always helpful when you have something versus you have an idea, you know,
trying to raise money having some actionable product that you can show that's connected to ideas always more valuable.
I think on the customer side, you're gonna have to do as many creative things as possible. You're not supposed to go and hire your executives your sales reps until you're funding. You're not gonna go. And do that in advance of it usually.
So you're going to go into the cold emails and the LinkedIn messages.
And you could use potential other software tools. You wouldn't get connections, but go and see who other customers who are interested in trying to see if there's a pattern, that level of interest and then really going to figure out who are the potential investors?
Well, most relevant to your sector, you know, and I'm absolutely you should reach out to them. This is the best time to be able to do that.
I can tell you, at least for me and my partners, we are actively making sure that we're responding to these cold emails.
My personal recommendation here would be in terms of reaching out to those investors to reach out to those potential. Customers is plus sales scale. Those two work great together.
So, octopuses for automated outreach on LinkedIn and sales scale. Basically.
Scraps of data on the Internet, find the emails of the person you found on LinkedIn. So those two work nicely together. I highly recommend using both of them. And here, we're moving onto. The last question of today's app is a, which is a call to action.
What's the one thing that you want the least start to do as soon as the app is always over ha a list that could be I'm assuming it's founders right?
And I need five percent chance that he or she's a founder. Yeah. So okay.
I think the big call to action that I'd have a two things one really decide if whatever you're working on or do we are planning to work on is something you want to dedicate the next ten years of your life to.
You have to be obsessed with this product. Usually, the best founders are the ones who think about these, the company, the mission, as the last thing they think about before they go to sleep.
And the first thing they think about when they wake up, that is usually the most successful founders, they have that accuracy. They have some.
On the unpredictable desire to solve the problem. I have we have realized that this is a problem that they're on a mission to solve and they will stop it. Nothing solve that problem.
I think that is, you know, figuring out if this is something you want to dedicate the next ten years and potentially longer life is very important.
And if if the answer is no, and you don't want to go through the Hardy, starting a company, maybe that answer will change three, four or five years from. Now, you're going to find some other exciting opportunity. But don't focus on something that you're not that excited.
The second thing is fairly pick your Co founders, trying to understand whether people around you, you're potentially working with your current job, you know,
from college you met at some event,
who could be complementary,
who have skills that you don't have.
But it will also have that same desire to fix a specific problem and make sure that you pick the founders that you feel you can work with the long term.
You know, I, I remind people of this, the average relationship between Co, founders and investors last longer than the average memory memory legacy. So it is very, very important. If you make this decision.
I think the last thing I'll say is obviously we'll think about the investors.
As you're gearing up to go and raise money, think about the investors, you want to happen your team and why, you know, what do they break? What is the value that they bring? Why are they the most important group to bring on this journey?
Because they've gotta be on the journey,
hopefully the long term that lead investors,
like we are,
they're gonna be on the board and if things work out, but they'll be on the board for ten plus years,
we were the first investor in Netflix and my now retired partner Mike was on the board to twenty twelve.
You made that investment ninety, ninety nine nice, long time. That's really cool. That's really cool. And Congrats on that looks, you know, they're perform real great right now so great work there and yeah.
Most definitely great advice in terms of, you know, thinking about it and long term startup worlds. Many people thinking about, you know, being fast and all that stuff. Realities. No, it's not, it's about being able to do the same thing for ten years.
It's not that fun as you see in the movies. So my personal call to action will be as usually go to the description of this episodes. I'll leave the links to see the articles there. If you're interested in cyber security. Definitely.
Check them out and then cold email, seed, mentioning fundraising radio. If not aliba also linked to the event that we're having tomorrow.
It's about it's called student star about it's about bring your ideas from being just ideas to actually.
Becoming fundable real company, so definitely go out and check the description of episode and have a great day. Everyone.